Question NW3444 to the Minister of Public Enterprises
24 November 2023 - NW3444
Cachalia, Mr G K to ask the Minister of Public Enterprises
Whether, considering that Transnet Freight Rail announced the completion of the Mamathwane crossing loop in the Northern Cape a month ahead of schedule (details furnished), the Government will now officially confirm that it has abandoned its state led approach to public enterprises and is moving towards more private sector participation in the sector; if not, what is the position in this regard; if so, what are the relevant details? (2) Whether he will share the overall plans and/or strategy at company level to move away from state control to public-private partnerships and perhaps to areas of full privatisation; if not, what is the position in this regard; if so, what are the relevant details?
Reply:
According to the information received from Transnet:
1. The South African government, through the Department of Public Enterprises (DPE), continues to emphasise that involving the private sector in State-Owned Enterprises' (SOEs) operations should not be regarded as a departure from a state-led approach to public enterprises. One example of a partnership with the private sector that enhances Transnet's logistical value chains is the Mamathwane loop. This partnership brings in capital investments, expertise, and/or competences.
The state continues to play a major role in the management, oversight, and ensuring that the mandates of the SOEs are in line with the country’s socio-economic goals. Prior to the implementation of private sector participation (PSP) transactions, the DPE and other government departments evaluate and authorise these transactions in accordance with the PFMA and other legislative requirements.
Furthermore, the Cabinet's approval of the National Rail Policy (NRP) in March 2022 and the presidency's subsequent development of the Freight Logistics Roadmap set the stage for the country to move towards a more liberal rail market—a move that will necessitate major structural reforms. By allowing 3rd party private operators to operate on the national rail network, these changes are expected to encourage competition. This shift in policy will increase the effectiveness and performance of logistics, promote the development of rail-based support services (such as rail-focused warehousing), and draw in capital (via the acquisition of rolling stock).
For the first time, Transnet Freight Rail (TFR) will no longer be the sole provider of freight rail services, as private train operating companies (TOCs) will be able to operate on the freight network. TFR must be vertically separated into its component parts, namely operations and infrastructure, as part of the envisaged policy reforms and the Freight Logistics Roadmap's recommendations. The appointment of the interim rail infrastructure manager (RIM) on 1 November 2023, is proof that this process is well under way. In order to foster stronger cooperation between Transnet and the private sector and develop a vibrant rail sector, the establishment of a RIM is essential.
2. Transnet’s strategy is based on repositioning the organisation to deliver against the economic needs of the key market segments that it serves. There is a considerable opportunity to expand volumes (+/- 60 million tonnes of additional volumes) in the bulk mining commodity space, particularly in respect of iron ore, manganese, ferrochrome, and magnetite, in the next three to five years.
In order to provide industrial segments with more access to global trade and commercial networks, Transnet is repositioning its rail network and terminals to improve operational efficiency and capacity expansion. This is supportive of the Port of Durban being repositioned as a hub port for containers and automotives and Richard's Bay as an effective bulk commodities port.
Consequently, Transnet is driving capacity expansion and improving and transforming the key market segments that it serves by leveraging private sector participation in concert with Transnet's own assets and skills. Transnet's current corporate plans, which were submitted to Parliament, National Treasury, and the shareholder representative, clearly outline the nature and approach of private sector participation.
In addition, Transnet developed a comprehensive Joint Investment and External Partner Selection (JIEPS) framework that guides the involvement of the private sector in the business. To determine whether the private sector will offer any value, for instance, an extensive business case is developed that also includes a detailed financial model. A decision is taken at that moment on the suitability of working with the private sector partner.
The private sector’s is also not limited to ownership but involves other considerations such as capital contribution (for example, by customers through upfront payment or tariff adjustments), operations, and management.
Remarks: Reply: Approved/Not Approved/Comment
Jacky Molisane P J Gordhan, MP
Acting Director-General Minister
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